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Daktronics, Inc. Announces Fourth Quarter and Fiscal 2014 Results

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BROOKINGS, S.D., May 28, 2014 (GLOBE NEWSWIRE) -- Daktronics, Inc. (Nasdaq:DAKT) today reported fiscal 2014 fourth quarter net sales of $136.2 million and net income of $1.8 million, or $0.04 per diluted share, compared to net sales of $124.5 million and a net income of $1.8 million, or $0.04 per diluted share, for the fourth quarter of fiscal 2013. Fiscal 2014 fourth quarter orders were $137.7 million compared to $113.8 million for the fourth quarter of fiscal 2013. Backlog at the end of the fiscal 2014 fourth quarter was $171.6 million compared to a backlog of $141.3 million a year earlier and $169.8 million at the end of the third quarter of fiscal 2014.

Net sales, net income and earnings per diluted share for the fiscal year ended April 26, 2014 were $552.0 million, $22.2 million and $0.51 per diluted share, respectively. This compares to $518.3 million, $22.8 million and $0.53 per diluted share, respectively, for fiscal 2013. The 2014 fiscal fourth quarter and annual earnings per share was negatively impacted by $0.05 due to the recognition of a $2.3 million valuation allowance against our deferred tax asset for our equity in investments.

Free cash flow, defined as cash provided by operations less net purchases of property and equipment, was $22.9 million for fiscal 2014 compared to $41.3 million for fiscal 2013. Cash and marketable securities at the end of the fourth quarter of fiscal 2014 were $71.0 million, which compares to $64.7 million at the end of the fiscal 2013 fourth quarter.

"We are pleased with our 8.5 percent growth in orders for the year. We were able to secure a number of multi-million dollar orders in the Live Events business unit, including six of the seven NFL stadium bids. Our International unit increased orders primarily in the sports arena and on-premise advertising areas. Our reseller and national account areas grew for the year while spectacular and billboard orders remained relatively flat in our Commercial business unit. Schools and Theatres orders decreased for the year due to a decrease in demand and a decrease in the size of the products, which lowered the average dollar size of the orders. Transportation business unit orders decreased for the year due to a large non-repeating order in fiscal 2013. The overall increase in orders contributed to our sales growth of 6.5 percent. For the 2014 fiscal year, operating income increased by over 19 percent and operating income as a percent of sales rose to 6.6 percent as compared to 5.9 in the prior fiscal year," said Reece Kurtenbach, president and chief executive officer.

Order volume for the 2014 fiscal fourth quarter was up 20.9% compared to the fourth quarter of fiscal 2013 due to order increases in the Live Events business unit and International business unit which offset a decrease in the Commercial business unit for the period. Fourth quarter sales increased over fiscal 2013 fourth quarter sales due to the increase in orders and a larger beginning backlog at the beginning of the quarter. Operating income for the 2014 fourth quarter was 5.0 percent of sales as compared to 1.6 percent of sales in the same period last year. Operating income increased due to a decrease in warranty expense and an increase in sales volume. The effective tax rate prior to the tax valuation charge was 34.2%. We estimate our effective tax rate to be 35 to 36 percent for fiscal 2015.

Outlook

Kurtenbach added, "We continue to see opportunities to profitably grow our business. Internationally, these opportunities are in sports and commercial video projects, architectural lighting, and third party advertising display solutions. Domestically, we see modest growth potential in the Commercial business unit, mainly in the spectacular display niche and digital billboard market. In Live Events, we expect to maintain sales levels based on estimated sport stadium renovations in the coming year. Transportation and Schools and Theatres business units are expected to both maintain similar sales levels in the coming year.

While we are the world leader in video system design and delivery, the world-wide market place remains competitive. The marketplace has stabilized over the past few years since the recession, but the price per square foot (or square meter) of display has decreased during this time. For our large video projects business, a significant percentage of the project costs can be associated with subcontracting, such as physical structure and display installation, which are quoted at lower general contracting margins. Our account based business for large regional and world-wide customers also remains competitive. Due to these factors, the amount of physical product we produce has increased to achieve the same revenue dollars.

While the competitive nature of our business pressures margins, we continue to focus on profitable growth. Our teams work to continually improve through lean initiatives to cost effectively build, install, and service our products. We design through product platforms to improve operational efficiency and reduce warranty costs. Our product development teams are also focused on additional LED module platforms for both Through Hole and Surface Mount Device products, as well as continued enhancements of our control system software. We invest in and will continue to expand our quality systems for our product designs, reliability testing, and manufacturing controls to continue to offer our customers high performing and reliable products. Operational areas such as sales and administration continue to focus on efficient methods to conduct their work to lower costs as a percentage of sales over the long-term.

To support our flexible capacity initiatives, we will finish our $4 million manufacturing expansions in fiscal 2015. We anticipate additional capital expenditures to be approximately $25 million. The most significant capital additions include manufacturing equipment to support new product production lines, quality initiatives, continued automation, and machine replacements. We continue to invest in new information technology hardware and software to keep the systems operational, reliable, and secure.

Fiscal 2015 will be a 53-week year. The extra week will fall within the first quarter, resulting in a 14-week quarter versus a 13-week quarter. We look forward to a successful fiscal 2015."

Dividend

As previously announced in a Current Report on Form 8-K filed with the Securities and Exchange Commission on May 23, 2014, the company approved a regular quarterly dividend of $0.10 per share payable June 13, 2014 to holders of record at the close of business on June 2, 2014.

Webcast Information

The company will host a conference call and webcast to discuss its financial results today at 10:00 am (Central Time). This call will be broadcast live at http://investor.daktronics.com and available for replay shortly after the event.

About Daktronics

Daktronics has strong leadership positions in, and is the world's largest supplier of, large screen video displays, electronic scoreboards, LED text and graphics displays, and related control systems. The company excels in the control of display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation, and video. Daktronics designs, manufactures, markets and services display systems for customers around the world in four domestic business units: Live Events, Commercial, Schools and Theatres and Transportation, and one International business unit. For more information, visit the company's World Wide Web site at: http://www.daktronics.com, e-mail the company at investor@daktronics.com, call (605) 692-0200 or toll-free (800) 843-5843 in the United States or write to the company at 201 Daktronics Dr., PO Box 5128, Brookings, S.D. 57006-5128.

Safe Harbor Statement

Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and is intended to enjoy the protection of that Act. These forward-looking statements reflect the Company's expectations or beliefs concerning future events. The Company cautions that these and similar statements involve risk and uncertainties which could cause actual results to differ materially from our expectations, including, but not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions and other risks noted in the company's SEC filings, including its Annual Report on Form 10-K for its 2013 fiscal year. Forward-looking statements are made in the context of information available as of the date stated. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
April 26,
2014
April 27,
2013
April 26,
2014
April 27,
2013
Net sales $ 136,240 $ 124,482 $ 551,970 $ 518,322
Cost of goods sold 102,486 96,379 410,260 384,428
Gross profit 33,754 28,103 141,710 133,894
Operating expenses:
Selling expense 13,684 13,231 53,794 52,759
General and administrative 7,196 7,256 27,984 27,404
Product design and development 6,045 5,654 23,375 23,131
26,925 26,141 105,153 103,294
Operating income 6,829 1,962 36,557 30,600
Nonoperating income (expense):
Interest income 349 357 1,294 1,523
Interest expense (66) (204) (255) (355)
Other (expense) income, net (4) (615) (355) (839)
Income before income taxes 7,108 1,500 37,241 30,929
Income tax expense (benefit) 5,282 (344) 15,035 8,150
Net income $ 1,826 $ 1,844 $ 22,206 $ 22,779
Weighted average shares outstanding:
Basic 43,228 42,553 42,886 42,280
Diluted 43,749 42,777 43,762 42,621
Earnings per share:
Basic $ 0.04 $ 0.04 $ 0.52 $ 0.54
Diluted $ 0.04 $ 0.04 $ 0.51 $ 0.53
Cash dividends declared per share $ 0.09 $ — $ 0.39 $ 0.73
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
April 26,
2014
April 27,
2013
(unaudited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted cash $ 45,568 $ 40,676
Marketable securities 25,398 24,052
Accounts receivable, net 82,500 63,227
Inventories, net 62,228 49,045
Costs and estimated earnings in excess of billings 33,400 39,355
Current maturities of long-term receivables 5,235 4,807
Prepaid expenses and other assets 6,758 6,185
Deferred income taxes 12,548 12,755
Income tax receivables 2,459 46
Total current assets 276,094 240,148
Long-term receivables, less current maturities 7,877 11,325
Goodwill 4,558 3,306
Intangibles, net 2,680 1,181
Advertising rights, net and other assets 826 772
Deferred income taxes 146 1,061
16,087 17,645
PROPERTY AND EQUIPMENT:
Land 2,539 1,497
Buildings 59,363 57,012
Machinery and equipment 72,787 65,600
Office furniture and equipment 15,754 16,118
Computer software and hardware 45,329 41,745
Equipment held for rental 868 868
Demonstration equipment 7,532 8,400
Transportation equipment 4,823 4,026
208,995 195,266
Less accumulated depreciation 143,725 133,641
65,270 61,625
TOTAL ASSETS $ 357,451 $ 319,418
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
April 26,
2014
April 27,
2013
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 45,913 38,651
Accrued expenses 23,462 24,331
Warranty obligations 14,476 13,933
Billings in excess of costs and estimated earnings 22,483 14,245
Customer deposits (billed or collected) 17,654 12,375
Deferred revenue (billed or collected) 7,722 9,112
Current portion of other long-term obligations 809 356
Income taxes payable 1,162 1,689
Deferred income taxes 27
Total current liabilities 133,708 114,692
Long-term warranty obligations 12,774 11,213
Long-term deferred revenue (billed or collected) 4,978 4,424
Other long-term obligations, less current maturities 2,871 843
Deferred income taxes 1
Total long-term liabilities 20,624 16,480
TOTAL LIABILITIES 154,332 131,172
SHAREHOLDERS' EQUITY:
Common stock 43,935 37,429
Additional paid-in capital 29,923 27,194
Retained earnings 129,266 123,750
Treasury stock, at cost (9) (9)
Accumulated other comprehensive income (loss) 4 (118)
TOTAL SHAREHOLDERS' EQUITY 203,119 188,246
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 357,451 $ 319,418
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Year Ended
April 26,
2014
April 27,
2013
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,206 $ 22,779
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 14,137 15,379
Amortization 364 228
Amortization of premium/discount on marketable securities 221 190
(Gain) Loss on sale of property and equipment (72) 42
Share-based compensation 2,897 3,037
Excess tax benefits from share-based compensation (119)
Provision for doubtful accounts (190) 331
Deferred income taxes, net 1,543 (4,340)
Change in operating assets and liabilities (4,788) 13,103
Net cash provided by operating activities 36,199 50,749
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,519) (9,674)
Proceeds from sales of property and equipment 238 198
Purchases of marketable securities (15,550) (16,506)
Proceeds from sales and maturities of marketable securities 13,953 17,451
Acquisition, net of cash acquired (1,480)
Net cash used in investing activities (16,358) (8,531)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (1,459)
Proceeds from exercise of stock options 4,954 1,316
Excess tax benefits from share-based compensation 119
Principal payments on long-term obligations (3,704)
Dividends paid (16,690) (30,859)
Net cash used in financing activities (15,321) (31,002)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (94) (11)
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,426 11,205
CASH AND CASH EQUIVALENTS:
Beginning of period 40,628 29,423
End of period $ 45,054 $ 40,628
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
April 26,
2014
April 27,
2013
April 26,
2014
April 27,
2013
Net Sales:
Commercial $ 37,064 $ 35,469 $ 154,754 $ 144,596
Live Events 50,566 36,921 197,246 158,562
Schools & Theatres 11,781 14,489 59,531 66,128
Transportation 13,050 15,557 54,861 73,270
International 23,779 22,046 85,578 75,766
$ 136,240 $ 124,482 $ 551,970 $ 518,322
Orders:
Commercial $ 32,318 $ 38,406 $ 155,840 $ 152,028
Live Events 51,329 29,317 225,331 161,602
Schools & Theatres 15,143 16,690 59,812 64,796
Transportation 15,009 13,922 49,057 73,426
International 23,856 15,491 87,094 80,158
$ 137,655 $ 113,826 $ 577,134 $ 532,010
Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands)
(unaudited)
Twelve Months Ended
April 26,
2014
April 27,
2013
Net cash provided by operating activities $ 36,199 $ 50,749
Purchases of property and equipment (13,519) (9,674)
Proceeds from sales of property and equipment 238 198
Free cash flow $ 22,918 $ 41,273

In evaluating its business, Daktronics considers and uses free cash flow as a key measure of its operating performance. The term free cash flow is not defined under U.S. generally accepted accounting principles ("GAAP") and is not a measure of operating income, cash flows from operating activities or other GAAP figures and should not be considered alternatives to those computations. Free cash flow is intended to provide information that may be useful for investors when assessing period to period results.

CONTACT: INVESTOR RELATIONS: Sheila Anderson, Chief Financial Officer (605) 692-0200 Investor@daktronics.com

Source:Daktronics